When is a person an “employee” under one insurance policy but not an employee under another?   Conflicting or inconsistent definitions across multiple policy lines issued to the same company can give rise to significant gaps in insurance coverage, as a recent opinion of the U.S. Court of Appeals for the Seventh Circuit instructs, Telamon Corp. v. Charter Oak Fire Insurance Co., Nos. 16-1205 & 16-1815 (7th Cir. March 9, 2017).

Telamon hired Juanita Berry in 2005 under a series of consulting agreements with her personal communications company, J. Starr Communications. Over the next six years, Berry’s job responsibilities expanded beyond the terms of the consulting agreements, with Telamon eventually naming her Vice President of Major Accounts, the senior-most manager in one of the company’s divisions on the East Coast.  Part of Berry’s job was to oversee an asset recovery program under which Telamon removed old AT&T equipment and sold it to salvagers.  But without the company’s knowledge, Berry personally removed the old equipment and sold it, keeping the money for herself.  By the time Telamon discovered the scheme, Berry had embezzled $5.2 million.  Telamon fired Berry, and the government indicted her on wire fraud and tax evasion charges.  She was convicted and sentenced to five years in prison.Continue Reading Schrödinger’s Coverage: When a Risk is Covered and Not Covered by Insurance

We recently marked the two year anniversary of Superstorm Sandy. With that anniversary came an influx of litigation in response to insurance companies denying or overly limiting coverage. That litigation recently revealed highly questionable practices within the industry.
Continue Reading Potentially Fraudulent Insurance Company Practices Are Exposed In Superstorm Sandy Litigation

The insurance industry reacts not only to real losses, but it reacts with equal concern to perceived risks, particularly where those perceived risks could, at least in theory, amount to significant financial loss for policyholders and/or insurers. The Ebola “crisis” is the latest example of the insurance market reacting to a perceived risk that may never amount to an actual insurable loss.
Continue Reading Perception versus Reality: ACE Adds an Ebola Exclusion Just in Case

This post was also written by Michael N. DiCanio.

Policyholders and their counsel should check out a May 27 ruling denying summary judgment to the insurance company defendants in Bray & Gillespie IX, LLC v. Hartford Fire Insurance Co., et ano. In the B&G decision, a magistrate judge in the Middle District of Florida relied in part on the so-called Broad Evidence Rule. Under that rule, any evidence logically tending to establish a correct estimate of the value of damaged or destroyed property may be considered by the trier of fact to determine “actual cash value” at the time of the loss. This means that replacement cost, wholesale cost, a contractor’s estimate, even the owner’s own testimony, are among the many types of evidence that a jury could consider to determine “actual cash value.” The judge in the B&G case characterized the Broad Evidence Rule as a “liberal admissibility standard.”

In the same decision, the magistrate judge suggested that a much tougher evidentiary standard must be met by an insurance company alleging fraud or misrepresentation by a policyholder.Continue Reading A Tale of Two Evidentiary Standards